Taco Bell Sees Sales Turnaround After Product Rollouts

Taco Bell is seeing a sales turnaround after the launch of its biggest product, the Doritos Locos Taco, and its breakfast rollout on the West Coast.

Overall, Yum's same-store sales in the U.S. increased 5%, with jumps at all three of its chains: Taco Bell, Pizza Hut and KFC. But the largest gainer was Taco Bell, with same-store sales up 6% compared to a drop of 2% in the fourth quarter of 2011.

Yum's CEO David Novak during an earnings call today pointed to the Doritos Locos Taco, which launched March 8, and the West Coast launch of the chain's breakfast program as contributing factors. He added that second-quarter gains are expected to be in the "high single digits to low double digits."

Taco Bell in February launched a new campaign and new tagline -- "Live Mas" -- created by DraftFCB, which also handles the KFC account. Mr. Novak said that the campaign was launched to "capture the charismatic appeal we have with the youth target audience" and "has been very well-received, very well-tested."

The chain also introduced breakfast in nearly 800 locations in January. The rollout included a co-branded menu with brands such as Johnsonville, Cinnabon and Tropicana. Mr. Novak said that the chain is adding breakfast at 200 more stores in the second half of this year.

Also testing is the Taco Bell Cantina menu, which is more upscale and focused on fresh ingredients (like Chipotle but at a lower price point). Mr. Novak said that "this is going to extend the breadth of appeal of the brand," and will "make us more mainstream with male and female target audiences." He added that both breakfast and the Cantina menu are "significant platforms that we're working on to grow our business on a sustainable basis."

As for other new products, Mr. Novak implied that more product innovation could be on the way. The chain previously confirmed that a Cool Ranch Doritos Locos Taco was to be unveiled later this year. Mr. Novak said that with the "reinvention of the taco with Frito Lay, we believe we're at the beginning."